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SFK Pulp Fund Maintains Suspension of Cash Distributions

Jan. 18, 2006 (Press Release) - SFK Pulp Fund announced today that it will maintain the suspension of its monthly cash distributions for the months of January and February 2006.

"Despite the positive signs shown by pulp markets and the reduction of global pulp inventories likely to result from the capacity curtailment announced by some of our competitors, pulp prices have remained stable since last October. In addition, the Canadian dollar has continued to appreciate and, during the fourth quarter 2005, it was, on average, 2.4% higher than in the third quarter 2005, which represents a continuing challenge across the industry", said André Bernier, President and Chief Executive Officer of SFK Pulp.

"SFK Pulp's Board has a formal policy governing the maintenance of reasonable cash reserves, mainly to support SFK Pulp's rigorous and long-term capital expenditure program. The Board has determined that the amount of these reserves should be fixed at approximately $10.0 million. Due to poor market conditions which have not improved as quickly as we had anticipated, these reserves have remained below the levels set under this policy. Under the circumstances, the Board will stick to its policy in order to preserve the continuing plant improvement programs. Accordingly, no distribution will be paid for the months of January and February 2006. SFK Pulp's Board will reassess in March 2006 whether monthly distributions should be resumed", said Hubert T. Lacroix, Chairman of SFK Pulp.

"Due to the abovementioned market conditions, we were unable to restore our cash reserves to the target level. We also experienced four days of recovery boiler downtime in early January. Under the circumstances, we believe that our cash reserves will remain below the minimum level prescribed by our distribution policy for the next two months. The Board has therefore decided to maintain the suspension of distributions for the months of January and February", continued André Bernier, President and Chief Executive Officer of SFK Pulp.

Through SFK Pulp General Partnership, SFK Pulp Fund operates a mill located in Saint-Félicien, Québec, approximately 450 kilometers north of Montréal in the Lac Saint-Jean region and has approximately 325 employees. The mill has an annual production capacity of 350,000 metric tonnes of NBSK pulp and is one of the lowest-cost producers of NBSK pulp in Canada. The mill supplies NBSK pulp to various sectors of the paper industry in Canada, the United States and in Europe for use in specialty products.

SOURCE: SFK Pulp Fund




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